Goldman Sachs Bullish on US Equities Despite Stock Market Flashing 80% Odds of Significant Correction

The co-head of Goldman Sachs’ global private wealth management unit, Meena Flynn, says the giant bank is bullish on the stock market.

In a CNBC interview, Flynn says that even though the megabank is expecting a market correction, it is “encouraging” its clients to stay invested in stocks.

“Whenever you’ve got a market that’s at the 10th decile, such as what we are now, it is likely that you’re going to get a drawdown. In fact, there’s an 80% probability of a 10% drawdown.

That being said, valuations aren’t the best predictor of what forward market performance is going to be. We’ve been in that 10th decile since December of 2016. And since that time, the market’s actually returned 200%. So we’re really focused on earnings.”

According to Flynn, there’s significant capital waiting on the sidelines that could be deployed to stocks.

“Despite markets being at all-time highs, this positioning is relatively light. Hedge funds are in 40th percentile of net long, mutual funds are sitting on $170 billion of cash. So there’s room. There’s actually a good amount of right tail risk to the market as well as clearly left tail risk.”

Flynn further says that the loosening of monetary policy by the Federal Reserve could also lead to more capital flowing into risk assets.

“$7.3 trillion [now sitting] in money market funds [such] that as rates start coming in, you start to see that go out the risk curve.”

Generated Image: DALLE3